The One Thing People Keep Getting Wrong About Janet Yellen

Janet Yellen, vice chair of the Board of Governors of the U.S. Federal Reserve System, speaks to an attendee prior to addressing the University of California Berkeley Haas School of Business in Berkeley, California November 13, 2012. REUTERS/Robert Galbraith Federal Reserve Chairman Ben Bernanke is expected to retire when the year ends.

Currently, the frontrunners to fill that vacated seat include current Fed Vice Chair Janet Yellen.

While Yellen is expected to continue Bernanke's policies, some fear that she'll want to keep things easy for too long.

In other words, she's considered a perma-dove.

But in a research note to clients on Thursday, Bank of America Merrill Lynch economist Michael Hanson says that's not correct. From his note:

First, Yellen isn't the perma-dove that some think. She has a centrist's record through both easing and tightening cycles. When times called for tighter policies, Yellen supported them — she has never cast a dovish dissent. Indeed, former Fed governor Meyer has written that he and Yellen attempted — unsuccessfully — to convince then-Chairman Alan Greenspan to raise rates in the fall of 1996 due to inflationary concerns. She was also early at the Fed in citing risks from the over-heating housing market, which is hardly an "easy at all costs" position.

Yes, Yellen is very much on the dovish side right now, but that is because the economy arguably warrants it: both inflation and employment growth are too low relative to the Fed's dual mandate. Her position also reflects less conviction of a rapid recovery than many of her Fed peers; a recent WSJ analysis showed Yellen has been the most accurate forecaster on the FOMC since the crisis began.

So she may seem dovish today, but her track record shows that she was hawkish when the Fed needed to be hawkish.